Monday, May 5, 2008

Yahoo Survives

Yahoo can continue to operate now that Microsoft has failed to corral enough support among Yahoo shareholders to take over and shutter the company. And I have to ask if this was the way Microsoft planned it all along.

Microsoft’s board cannot seriously have expected Yahoo’s board to accept a price that implied that Yahoo was in trouble or Yahoo’s employees to go along with a plan to split them up among various divisions at Microsoft and replace their web pages with MSN pages. If it had really meant to buy Yahoo, Microsoft could have made a different offer or suggested a different plan.

And so it seems likely that Microsoft made its offer mostly in order to weaken a competitor by calling its future into question. What will happen to my personal data if Microsoft gets its hands on it? Will my business services at Yahoo be at risk if Microsoft shuts Yahoo down? These are the questions that have made Yahoo’s customers hesitate of late. Will I have to work 80 hours a week on a project hobbled by Microsoft’s secrecy rules? This is one of the questions that led Yahoo engineers to leave the company in droves in March.

By keeping Yahoo’s customers and workers in suspense, Microsoft may have slowed down activity at that competing company. Yet the massive free publicity, with news stories often incorrectly positioning Yahoo as a direct competitor to search giant Google, has helped solidify Yahoo’s brand. At the same time, Yahoo responded to the Microsoft threat by finding ways to increase its revenue, making it a more formidable competitor than it was before.

If Microsoft thought buying off a competitor was a shortcut to get them in front of the Internet market, they were mistaken. If it wants MSN to be taken seriously as an Internet gateway, it can’t just continue offering a level of service that Internet users find disappointing. MSN is already a well-known brand. To compete, all it has to do is deliver.